Meta reports better-than-expected results for Q1 but metaverse continues to lose billions
Zuckerberg says Meta has no intention of shifting its focus away from metaverse
Meta Platforms has announced its financial results for Q1 2023, reporting an increase in sales revenue, although Meta Reality Labs, which is responsible for developing advanced virtual and augmented reality technologies for the metaverse, recorded a considerable operating loss of $3.99 billion.
The division managed to generate only $339 million in revenue during Q1 2023 despite Meta generating billions in advertising revenue during the quarter.
However, in some good news for the Meta Reality unit its operating loss decreased from $4.28 billion in the previous quarter to $3.99 billion in Q1, on $727 million in revenue.
For the last calendar year, Reality Labs saw an operating loss of $13.72 billion on $2.16 billion in sales, highlighting the fact that VR and AR technologies have not yet penetrated the mainstream market.
According to research firm NPD Group, US sales of VR headsets dropped by 2% year-over-year as of early December 2022. Meta responded to declining VR headset sales by reducing prices for its Quest 2 and Quest Pro models.
The Quest 2 is now available for $430, which is $70 less than its previous price. Similarly, the high-end Quest Pro was discounted by $500 and now sells for $1,000.
Mark Zuckerberg, CEO of Meta, has designated 2023 as the "year of efficiency" for the company and to achieve this goal, Meta has introduced a series of cost-cutting initiatives, including redundancies that will affect approximately 21,000 employees.
Despite scaling back its ambitions for the metaverse, Meta remains committed to the concept.
During Meta's earnings call on Wednesday, Zuckerberg said that the company has no intention of shifting its focus away from this field.
"A narrative has developed that we're somehow moving away from focusing on the metaverse vision, so I just want to say upfront that that's not accurate," he told the investors.
He said that building the metaverse is a complex and long-term endeavour and that the company remains "committed to it."
Meta's stock saw a significant boost in after-hours trading on Wednesday, with shares rising by 12% following the release of the better-than-expected financial results.
This positive outcome marks a departure from the company's recent performance, which had seen three consecutive quarters of declining results.
"We had a good quarter and our community continues to grow," Zuckerberg said.
"Our AI work is driving good results across our apps and business. We're also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision."
Meta reported a first-quarter revenue of $28.65 billion, representing a year-over-year increase of 3%.
In March 2023, the average number of Facebook daily active users (DAUs) was 2.04 billion, which represents a 4% year-over-year growth.
The company's projections for the second quarter have also surpassed expectations.
Meta anticipates revenue of between $29.5 billion and $32 billion for Q2 2023, while analysts were expecting sales of $29.5 billion, according to Refinitiv.
Meta announced that its total expenses for 2023 are expected to be within the range of $86 billion to $90 billion, which includes restructuring costs of $3 billion to $5 billion.
Investors have shown support for Zuckerberg's strategy to streamline his company via a series of cost-cutting measures, including dismissals, which are expected to result in approximately 21,000 job cuts.
Like the wider tech industry, Meta is also shifting its focus towards AI.
The emergence of the ChatGPT revolution has shaken up the sector, leading numerous companies to pursue the development of a competitive alternative to OpenAI's solution.
In a recent discussion with investors, Zuckerberg provided more insight into Meta's aspirations within the AI domain.
While he did not delve into the specifics of the plan, he said that he wants to "introduce AI agents to billions of people".